AT&T’s merger with Time Warner (Entertainment) is now complete, and despite repeated promises to antitrust regulators AT&T would not use consolidation as an excuse to raise rates, the company is reportedly doing exactly that on its DirecTV Now online streaming service.

According to a report by Cord Cutters News, most current subscribers will be formally notified this week their rates are going up $10 a month and new customers will be offered only two choices for DirecTV Now packages going forward — a slimmed down Plus package of 40 channels and HBO for $50 a month and a slightly larger Max package with 50 channels bundled with HBO and Cinemax for $70 a month. Both represent fewer channels for more money.

News about big changes for AT&T’s streaming services were first announced by AT&T CEO Randall Stephenson in late 2018, telling investors he planned to wring more profit out of DirecTV Now by raising rates and slimming down the number of channels in the remaining packages.

Current customers can keep their current packages indefinitely, but they will pay more starting in April. The $10 rate increase comes on the heels of a $5 rate increase in the summer of 2018, and AT&T has made it clear more price hikes are forthcoming as needed.

AT&T also told Cord Cutters News that DirecTV’s satellite service will soon debut on its own streaming platform, but it won’t come discounted or cheap:

• 65 channel DirecTV package: $93/month
• 85 channel DirecTV package: $110/month
• 105 channel DirecTV package: $124/month
• 125 channel DirecTV package: $135/month

AT&T hopes its simplified menu of offerings for DirecTV Now will prove attractive to subscribers, in part because both packages bundle either AT&T-owned HBO or HBO and Cinemax. But subscribers are also likely to notice the dramatically smaller package of cable channels, now missing AMC, Viacom and Discovery-owned networks. They are also likely to be confused by the forthcoming introduction of DirecTV satellite streaming packages, which will be marketed separately from DirecTV Now. AT&T plans to eventually mothball its satellite fleet and move DirecTV entirely to an internet streaming platform, but will take several years before switching off the last satellite.

AT&T’s DirecTV Now will slim its packages down substantially as early as tomorrow, while raising prices.

An informal FAQ:

Q. When will AT&T make these changes?

A. AT&T is expected to email current customers on or about March 12, 2019 to inform them of the $10 rate hike. At the same time, AT&T is likely to stop signing up new customers for its current DirecTV Now packages and begin offering DirecTV Now Plus or DirecTV Now Max instead. Current customers can expect to see their first bill with the new rates in April.

Q. Will current customers be grandfathered?

A. AT&T plans to tell current customers they can keep their current packages as long as they do not make changes to their account (or cancel), but effective April 12, 2019, rates will increase $10 a month for those subscribed to: Live a Little, Just Right, Go Big, and Gotta Have It.

Q. If I subscribe today to the older packages, can I avoid some of the price increases and channel changes?

A. Yes and no. If AT&T’s schedule holds, today is the last day you will be able to signup for DirecTV Now’s old packages, and you will need to make a payment today and skip the free 7-day trial to lock in these packages or you could face choosing only between Plus and Max after your trial ends. You will pay existing rates for March, but the $10 rate increase will impact you starting in April.

Q. What about the prices for premium channels?

A. If the rumors are true, and we stress these are only rumors at this point, current DirecTV Now customers that already subscribe to premium networks like HBO or Cinemax prior to March 12, will be able to avoid planned rate increases on premium networks that are also supposed to be announced as early as tomorrow. If you sign up today and subscribe to HBO and/or Cinemax, you will pay $5 a month for each going forward. Showtime and/or Starz are also available for $8 a month each going forward. The rumor claims that starting tomorrow, HBO will triple in price to $15 each, with Cinemax, Showtime and Starz supposedly increasing to $11 a month each. These new prices would only apply to grandfathered customers on older packages that want to add a premium network on or after March 12 to their existing package. AT&T would use this new pricing to incentivize customers to abandon their old package in favor of Plus or Max, which bundles HBO and HBO and Cinemax into the base package price. So if you are thinking about subscribing to a premium network and want to keep your old package, you should subscribe today and lock in the current lower price.

Q. What happens to pricing for add-on international channels?

A. If you subscribe to international channels (Vietnamese – $20/mo, Brazilian Portuguese – $25/mo, or Korean – $30/mo) before March 12, your rates stay the same. If you add these channels on or after March 12, you will likely pay more to do so. If you are considering these channels, you may save a lot in the long run subscribing today for at least a month to lock it current prices. If the rate increase does not happen, you can drop the add-on after a month.

Q. What are the biggest differences between the old and new packages?

A. You are getting fewer channels for more money from the new Plus and Max package tiers. DirecTV Now is stripping out popular cable networks from AMC, Discovery-Scripps, and Viacom from the new packages, but bundles HBO in the new Plus package and both HBO and Cinemax in the new Max package. An unofficial new channel lineup of both new packages can be found here.

Q. Why are they raising rates like this?

A. AT&T shareholders have been increasingly critical about the company’s 2015 acquisition of DirecTV. Executives sold Wall Street on the acquisition on the theory that acquiring the country’s largest cable TV programming distributor with 21+ million customers would deliver AT&T’s much smaller U-verse TV (with 4-5 million customers) dramatically better volume discounts on cable TV programming. More importantly, it would help AT&T become a powerhouse in video entertainment and cut through the red tape of getting that programming on AT&T’s mobile products. If you are a cable network’s biggest customer, it helps in negotiations seeking streaming and platform distribution rights.

Stephenson

After the merger, AT&T began de-emphasizing its U-verse brand and even started selling DirecTV satellite service to video-only AT&T customers. DirecTV Now was AT&T’s response to cord-cutting, and its promotional pricing and strong package of channels was customer and regulator friendly. At the same time AT&T was seeking to win regulator approval of its acquisition of Time Warner (Entertainment), it did not hurt to argue AT&T’s prior acquisitions had not hurt the marketplace, and may have even enhanced it, pointing to the DirecTV Now offering in the cord-cutting marketplace.

But Wall Street analysts have often argued AT&T is losing money on DirectTV Now, because the wholesale programming costs plus the distribution and marketing expenses likely exceed the prices AT&T charges. Some analysts are even questioning the wisdom of acquiring DirecTV in the first place, especially as the era of cord-cutting has taken a particularly harsh toll on DirecTV’s satellite subscriber numbers. Just a few weeks after the Justice Department abandoned further court action to block the merger of AT&T and Time Warner, Stephenson followed through on his commitment to shareholders by preparing to prune back DirecTV Now’s packages and dramatically increases prices at the same time.

“We’re talking $50 to $60,” Stephenson told investors last December. “We’ve learned this product, we think we know this market really, really well. We built a two-million subscriber base. But we were asking this DirecTV Now product to do too much work. So we’re thinning out the content and getting the price point right; getting it to where it’s profitable.”

Stephenson fully expects DirecTV Now will soon shed a large percentage of ‘low value’ customers that subscribed only because they locked in a low price or promotion, telling investors he prefers to deal with high-value customers that appreciate AT&T’s brand and quality, and won’t cancel over price increases. He does not want to deal with customers that chase promotions.

AT&T is also using the changes to reset its video portfolio of products, and the audiences each will target. Those most sensitive to price will be marketed ultra-skinny bundles like AT&T Watch, which can also be used to try and get customers to switch to AT&T wireless. Middle ground customers partially sensitive to price, but want a channel lineup that better reflects what they actually watch will be pushed towards DirecTV Now, which will be marketed as cheaper than cable and a good option for cord-cutters. DirecTV’s forthcoming satellite streaming service will be the new home for customers that gravitated towards DirecTV Now’s higher end bundles. Marketing will focus on customers that want an alternative to cable television, but won’t sacrifice their favorite cable channels just to get a lower bill. These customers will be willing to pay a higher price to have a less-jarring transition from the traditional huge cable TV package to DirecTV’s alternative.

Q. What does AT&T risk doing this?

A. Hundreds of thousands of DirecTV Now subscribers are likely to cancel service as a result of this rate increase, which will leave DirecTV Now at a higher price than many of its competitors. AT&T’s loss will likely deliver a sudden spike of new customer signups for YouTube TV and Hulu Live TV, which are the closest equivalents. Other services like Philo, Vue, and even Sling TV are also likely to grab new customers, albeit in smaller numbers.

AT&T’s biggest threat may turn out to be cable operators — especially Charter Spectrum, which has launched its own response to cable TV cord cutting. Its slimmed down and pick-your-own-channels packages could be more attractive than other streaming services, and bundle all local channels.

More specifics about those options are ‘below the fold’:

… Continue Reading

When AT&T announced it would offer 100+ cable television and broadcast network channels under the DirecTV Now brand for $35 a month, Wall Street had a fit.

Craig Moffett, an analyst with Moffett-Nathanson, speculated that AT&T would make at most a profit margin of $5 a month for its $35 a month plan, once programming costs were covered. But then AT&T announced it would sweeten the deal with a free Apple TV Player or Amazon Fire Stick for those confident enough to prepay for the new service. That makes DirecTV Now a purposefully unprofitable service, creating considerable stress for both the cable and satellite industry and their investors.

Variety notes the average DirecTV satellite subscriber delivers about $60 a month in profit to its owner, AT&T. That led the industry magazine to speculate DirecTV Now is a “loss leader” designed to sell its parent company’s AT&T-Time Warner, Inc. merger deal to regulators on the premise of increased competition delivering real savings to consumers.

Thankfully for Wall Street’s nerves, AT&T’s usual practice of marketing things with a lot of fine print emerged in the nick of time, and the $35 dollar price has now turned out to be an introductory offer for early adopters. In the not-too-distant future, AT&T will enroll new customers for its “Go Big” package at a much more profitable $60 a month. Customers who sign up at the $35 rate and stay customers will be able to keep that price as long as they make no changes to their account after the promotion ends.

Moffett

But Moffett warned investors that the traditional cable television model is still under serious threat, and AT&T’s less-promoted “Live a Little” package offering 60 popular cable networks for the everyday price of $35 is the equivalent of AT&T “running with scissors” because it alone could cause millions of cable and satellite customers to cut the cord and stay more than satisfied with a slimmed down cable package.

“Virtually all the channels that anyone would really want, save for regional sports networks” are included in the lighter “Live a Little” package, Moffett added. Customers who loathe watching sports but want a beefier package can also sign up for a $50, 80-channel “Just Right” package that primarily omits sports-oriented channels and a handful of spinoff cable networks few would miss.

Moffett and other Wall Street analysts were hoping AT&T would bloat its cheaper package with home shopping, religion, and other little-watched, low-cost cable networks and then entice customers to upgrade to unlock more popular cable channels. Instead, AT&T’s most premium package — “Gotta Have It” which costs $70 a month adds the “can live without” networks like Boomerang, Cloo, El Rey, Centric, and other little-known channels that typically live unnoticed in Channel Siberia on 500+ channel cable lineups. The highest premium priced package is attractive only for those looking for Starz/Encore channels and the basic cable network that gets no respect — Hallmark Movies & Mysteries (a/k/a the Dick van Dyke Permanent Employment Network.)

“By stacking their base package with all the best networks — likely a requirement for getting the programming contracts at all — they still have the same problem that was highlighted initially,” by Moffett. “Put simply, they aren’t going to make any money.”

That quest for profit is further challenged with subscriber acquisition programs that dole out free Apple TV units to customers willing to prepay for three months of service at the $35 rate or an Amazon Fire Stick (with Echo remote) in return for prepaying for one month of service. Anyone in the market for either device can sign up for DirecTV Now, get the equipment at an attractive price, and consider the 1-3 months of service a free extra bonus. Customers were reportedly lining up at AT&T’s owned and operated retail outlets (not authorized resellers) to pick up devices and sign up for service today.

At these prices and with these promotions, AT&T DirecTV Now could first decimate the subscriber base of its immediate competitors Sling TV and PlayStation Vue, either of which offer a much less compelling value. AT&T can afford to charge a lower price because it has deeper pockets and enormous volume discounts on the wholesale price of cable programming — combining millions of DirecTV and U-verse TV subscribers together to negotiate what industry insiders suspect are major discounts the smaller providers cannot get.

But there are issues likely to be deal-breakers for some would-be DirecTV Now subscribers:

• Local broadcast stations are available only in a handful of selected cities and only a very few include all ABC, NBC, and FOX affiliates. CBS is not participating in DirecTV Now at this time, and that is a major omission;
• NFL Network isn’t on the lineup;
• Regional sports networks are spotty and geographically restricted. Here is a detailed PDF outlining options by zip code;
• There is a limit of two concurrent streams and although video quality is very good, it is not the 1080/HD experience AT&T’s marketing material would suggest. The quality of your internet connection will make a difference;
• No DVR option at this time.

CNET compiled an excellent channel comparison chart to help consumers figure out which, if any, of these upstarts make sense as a cable TV replacement:

$5 a month each for HBO and Cinemax.

Time Warner, Inc. did its part, offering a substantial deal to DirecTV Now to allow customers to add HBO and Cinemax for just $5 a month each, substantially less than what both networks charge customers signing up a-la-carte. This also unlocks access to streaming options on both networks’ websites.

In fact, as a DirecTV Now customer, you will also become an authenticated pay television subscriber, unlocking access on various cable network websites to extra streaming and on-demand options.

The implications of DirecTV Now depend on how long AT&T extends its $35 offer, which is going to be compelling for a lot of Americans. Moffett predicts DirecTV Now could sign up a staggering 11 million Americans — at least two million cannibalized from its own DirecTV satellite customer base, six million cutting the cord on their cable company (including AT&T U-verse) and another three million cord-cutters or “cable-nevers.” Most of the latter are Millennials, and research suggests $35 may be low enough of a price point to sign them up.

AT&T is also raising concerns among internet activists because online streaming of DirecTV Now will not count against an AT&T postpaid customer’s data allowance. This zero rating scheme is seen as an end run around Net Neutrality, particularly because AT&T is not as generous with its competitors. AT&T said it will offer other video streamers the possibility of being exempted from AT&T data allowances, if they pay AT&T for the privilege.

How It Works/Signing Up

AT&T DirecTV Now starts with the Google Chrome 50+, Safari 8+ or Internet Explorer 11+ (on Windows 8 and up) web browsers or the DirecTV Now app. AT&T recommends Chrome for desktop viewing. The service doesn’t work with Firefox, Microsoft Edge, or legacy browsers.

The first step is registering for a 7-day free trial. Before handing over your credit card number, if you scroll down you will find a small free preview option is also available that includes a largely useless streaming barker channel promoting the service and a respectable collection of video on demand options from basic cable networks. The free video streaming option will give you a clue about how the service is likely to perform on your internet connection and devices. For the record, DirecTV Now now supports:

• Amazon Fire TV
• Amazon Fire TV Stick
• Apple TV (4th generation)
• Android^TM phone 4.4 and higher
• Android tablet 4.4 and higher
• Chromecast (for Android only)
• iPad iOS 9 and higher
• iPhone iOS 9 and higher
• iPod Touch version 9 and higher

Support for other devices like Roku is coming next year.

Customers must be within the United States to use the service. If you travel abroad or to any U.S. territories like Guam, the Virgin Islands, or Puerto Rico, DirecTV Now will stop working until you return. When you sign up, keep in mind your billing zip code will mean a lot when it comes to accessing regional sports and local broadcast channels. DirecTV Now uses your billing zip code and your actual location to determine whether you are qualified to access regional sports networks and local stations.

Score a Free Apple TV Player or Amazon Fire TV Stick

Apple TV (4th Generation): Effectively free after prepaying for three months of service.

If you are looking to score an Apple TV (4th generation) or an Amazon Fire TV Stick, you will want to skip the 7-day free trial and enroll in a paid plan immediately, which will allow you to select which player you want. If you want the Apple TV, you will prepay for three months at $35 a month ($105). The Amazon Fire TV Stick only requires you to prepay for the first month of service ($35). One device per email address, but you can sign up for multiple accounts (using individual email addresses) and get a device for each — especially useful for larger families that could run into DirecTV Now’s two-stream limit.

Consider your choices before enrolling. If you want to add premium channels or upgrade your plan, and you select the three-month prepay option to grab an Apple TV Player, adding premium channels like HBO and Cinemax or moving to a higher plan will result in three months of prepaid charges for those upgrades as well, billed automatically to your credit card on file — which amounts to a $30 charge if you select HBO and Cinemax. After your promotional prepaid term ends, your account will continue to be billed at the $35 (plus any add-ons) rate until you cancel. AT&T covers you for the forfeited first free week by extending your bill date out by seven days. Allow 2-3 weeks for the device(s) to be shipped to you.

You can also sign up at an AT&T owned and operated retail store, but be aware AT&T “authorized” reseller stores are not participating in this promotion. That may allow you to bring home a device today.

Don’t care about the device promotions? Take the 7-day free trial, but be aware that you are giving AT&T your credit card number and charges begin immediately after the free week ends unless you cancel. Here’s how:

1. Sign in to your account.
2. From your User Account overview page, select Manage My Plan.
3. Select the Cancel Plan link.
4. Choose one of the listed reasons.
5. Select Cancel Now to confirm cancellation.

Your subscription will continue until the end of the billing cycle. No refunds or credits are provided for partial months. Your account will revert to Freeview demo status after you cancel a subscription.  You can add a subscription package back at any time.

Oddly, AT&T is not charging sales tax for New York, California, Maryland or Virginia residents. Customers in states like Tennessee where AT&T provides local phone service were most likely to face sales taxes. Those signing up early are in the best position to exploit what appears to be an oversight, or it represents the first time the New York Department of Taxation and Finance left money on the table.

Streaming from Your AT&T Wireless Device Does Not Count Against Your Data Allowance

If you’re a DirecTV Now and AT&T Wireless customer, streaming most DirecTV Now movies and programs over the AT&T wireless network won’t count against your data usage allowance, according to AT&T. But believe it or not, AT&T’s fine print indicates advertisements and non-streaming app activity do count! There are some other important disclosures to be aware of:

• You must be on the AT&T Wireless network within the U.S. (U.S. territories are not qualified for zero rating);
• You must be a postpaid, not a prepaid AT&T wireless customer to qualify and must not have “data block” on your mobile line;
• If you are grandfathered on an unlimited data plan, using DirecTV Now will not count against the 22GB data threshold which subjects you to speed throttling;
• This offer may disappear at any time and/or is subject to change.

DirecTV Now Qualifies You as an Authenticated Pay Television Subscriber

Many cable networks require customers enter their cable, satellite, or telco TV login credentials to unlock video streaming and on-demand features. DirecTV Now is a qualified provider for these websites (more coming):

• ABC
• Disney
• Disney Jr.
• Disney XD
• ESPN (WatchESPN)
• Freeform
• HBO GO (requires subscription to HBO)
• MAX GO (requires subscription to Cinemax)

Other networks are not yet enabled for DirecTV Now. CNN, for example, has a prompt for DirecTV satellite customers to log in, but DirecTV Now has its own account registration system.

Local Channels Are Very Spotty

Local over the air channels are very limited on DirecTV Now and are geographically restricted. You can access these channels only if you are located in or very near to the cities listed below and your billing zip code is in the same area. If you travel outside of the immediate area, live streaming will stop working until you return.

Giving the Service a Test

Stop the Cap! enrolled as an ordinary customer this morning and gave the service a rigorous test, including multiple streams over our 50/5Mbps internet connection. The service debuted today, and there is little doubt there is intense interest from consumers, so we expected some performance problems from the initial demand. We didn’t see any evidence of traffic congestion, however, and that is a good sign.

AT&T’s John Stankey explaining DirecTV Now.

A similar test of Sling TV did not perform as well during peak viewing times, when streaming problems emerged. DirecTV Now seems to be built to withstand intense demand.

One customer with a 6Mbps U-verse internet connection “in the boonies” was impressed the video quality of DirecTV Now was high even on a relatively slow DSL-like connection.

“This blows SlingTV away,” the person shared. “I only have U-verse 6Mbps internet service and it is not pixelated or buffering at all. Looks exactly like my regular DirecTV picture.”

AT&T published these recommendations for DirecTV Now customers regarding internet connection speeds:

• 150kbps – 2.5Mbps – Minimum broadband connection speed for Mobile devices
• 2.5 – 5.0Mbps – Recommended for HD quality

We’ve been led to believe DirecTV Now should perform equivalently to 1080i HDTV service (depending on the video source of course). We cannot say we agree it does right now. We noticed significant artifacts on high-motion video and picture graininess that left us feeling this was closer to a 720p HD experience. It isn’t possible to say whether the video player reduced playback quality because of internet traffic issues we were unaware of or if this is how the picture is supposed to look. It did not significantly detract from the viewing experience and the lack of buffering and pixelation was far more important to us.

AT&T store in NYC.

DirecTV Now would serve adequately as a cable TV replacement if it had local station coverage and some type of DVR. At present, DirecTV Now is limited to a “Restart” feature that allows you to restart shows already in progress on certain channels, but you cannot fast-forward or record a restarted show. Once AT&T introduces a cloud-based DVR and fills out the local station lineup, this service could be lethal to overpriced cable TV packages.

AT&T’s marketing attempts to undercut the powerful position of inertia by setting an unknown time limit for customers to enroll in the $35 a month video package. If you don’t sign up today, you may not get the “free” Apple TV or Amazon Fire Stick and a respectable cable TV package for just $35 a month — about half what cable operators are charging these days for their bloated video packages. AT&T doesn’t care if you stick with your current cable provider and signup for DirecTV Now, if only to grab free streaming video equipment while sampling the service. They get their money either way.

Had AT&T permanently kept the price at around $35, many consumers would likely sit back and wait for AT&T to sort out the streaming contract issues it has with the TV networks — CBS in particular, and come up with a DVR solution before those potential customers decided to sign up and make the change. Based on several “hot deals” websites, the mentality among many consumers is to “lock in” the $35 price now and wait for AT&T to build out the package while continuing to invest $35 a month on it. That doesn’t seem so bad when you get free electronics as part of the deal.

Our Final Take

AT&T’s DirecTV Now is a potential winner and worth signing up for because of the introductory price and free equipment offers. But if you decide not to disconnect your cable/satellite television service, it is probably safe to drop DirecTV Now after your prepayment expires and return to resume service a little later. There will probably be some warning when AT&T will end the introductory price for the service, and interested customers can hop back on board before that date arrives. DirecTV Now will be a formidable competitor, but it will fight against consumer resistance to confront the cable company and cut cable’s cord until it solves the local channels issue and has a credible DVR option. The service could also use an add-on to make adding additional concurrent streams possible and more affordable than just signing up for a second account.

Don’t count out Big Cable just yet. With data caps and other internet overcharging schemes, Comcast, Cox, Suddenlink, and others can play games with usage allowances to deter customers from streaming all of their video entertainment online at the risk of blowing past their allowance. DirecTV Now’s $35 price won’t mean much after overlimit fees begin appearing on your internet bill.

Netflix and the rise of online video has taken its toll on what used to be a household name in DVD rental.

DISH Network Corporation today announced its subsidiary Blockbuster will close its 300 remaining retail rental locations and end its DVD-by-Mail rental service in mid-December.

“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” said Joseph P. Clayton, DISH president and chief executive officer. “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”

At its peak in 2004, Blockbuster had nearly 60,000 employees and more than 9,000 video rental stores. The company’s inadequate response to the rise of Netflix, which rented out its DVD’s by mail, caused revenue to plummet and Blockbuster filed for bankruptcy in September 2010.

Legendary investor Carl Icahn called Blockbuster “the worst investment I ever made.” DISH may feel the same way.

After acquiring the remnants of Blockbuster for $233 million and assuming $87 million in debt and liabilities at a 2011 bankruptcy auction, DISH found itself quickly in retreat, closing 200 Blockbuster rental stores in 2011, 500 more in 2012, and another 300 this year. Despite efforts to compete head-on with Netflix, Blockbuster’s DVD-by-Mail business never achieved much success because Netflix maintained a better selection and faster delivery from a more extensive network of regional distribution sites.

Today’s announcement marks the end of Blockbuster’s retail rental experience and its DVD rental distribution centers will close by early January as customer DVD rentals are returned in the mail.

Over the past 18 months, Blockbuster has divested itself of assets in the United States, as well international assets, including operations in the United Kingdom and Scandinavia. DISH will continue to support Blockbuster’s domestic and international franchise operations, relationships and agreements.

DISH will keep licensing rights to the Blockbuster brand, and key assets, including the company’s significant video library. DISH will focus on delivering the Blockbuster @Home service to DISH customers, and on its streaming service, Blockbuster On Demand.

Data caps protect incumbent big studio and network content creators at the expense of independent producers and others challenging conventional entertainment business models.

That was the conclusion of several writers and producers at a communications policy forum hosted by Public Knowledge, a consumer group fighting for an open Internet.

A representative from the Writers Guild of America West noted that cord-cutting paid cable TV service has become real and measurable because consumers have a robust online viewing alternative for the first time. John Vezina, the Guild’s political director, noted how Americans watch television is transitioning towards on-demand viewing.

New types of short-form programming and commissioned series for online content providers like Netflix are also changing the video entertainment model.

Welch: It is about the money.

But a digital roadblock erected by some of the nation’s largest broadband providers is interfering with that viewing shift: the data cap.

Data caps place artificial limits on how much a customer can use their Internet connection without either being shut off or finding overlimit fees attached to their monthly bill. Critics contend usage caps and consumption billing discourage online viewing — one of the most bandwidth intensive applications on the Internet. With broadband providers like Time Warner Cable, AT&T, Verizon, and Comcast also in the business of selling television packages, cord-cutting can directly impact providers’ bottom lines.

Providers have traditionally claimed that usage limits are about preserving network resources and fairness to other customers. But Time Warner Cable admits they exist as a money-making scheme.

Rachel Welch, vice president of federal legislative affairs at Time Warner Cable, says the cable company is not worried about limiting data consumption. It considers monetizing that consumption more important.

“We want our customers to buy as much of the product as possible,” Welch told PC World. “The goal of companies is to make money.”

Time Warner now offers customers a choice of unlimited service or a $5 discount if customers keep their monthly usage under 5GB, but some worry that is only a prelude to introducing expanded usage limits on a larger number of customers in the future.

For many consumers already hard-pressed by high broadband bills, worrying about exceeding a data allowance and paying even more may keep viewers from watching too much content online.

For that reason, Vezina called data caps “anti-innovation.”

“It hurts consumers [and] it hurts creators who want to get as much out to the public in as many ways” as possible, he said.

Public Knowledge has become increasingly critical of data caps in the last two years. The organization has questioned how ISP’s decide what constitutes a ‘fair’ usage limit and criticized inaccurate usage meters that could potentially trigger penalties and overlimit fees.

Verizon encourages customers to pig out on wireless-delivered streaming video.

Despite claims of a looming data usage crisis created by insufficient wireless spectrum, Verizon Wireless is introducing a new app that will encourage customers to find and watch streaming video on their mobile devices.

Viewdini premiers today on the Android platform, and Verizon hopes customers will use it to hunt down their favorite videos from Netflix, Hulu Plus, mSpot, and Comcast Xfinity, all from the Verizon Wireless app.

“We are just seeing a hunger for people wanting to watch video,” Verizon Wireless CEO Dan Mead said in an interview with AllThingsD. “I think this will capture the audience’s imagination.”

If customers use it to stream bandwidth heavy video on a tiered data plan, Verizon will also have the customer’s attention when the bill arrives.

Viewdini, considered one of Verizon’s “key product launches” for the year, does not amount to much on examination. The service does not host videos, it merely indexes them from other videocentric websites. The app will be exclusive to Verizon Wireless, but is not the company’s first foray in the competitive video streaming marketplace.

The Verizon Video app offers streamed video entertainment, but with a twist. Many titles offered by Verizon Video cannot be accessed while on Wi-Fi and require the company’s 3G or 4G network to watch, which counts against your usage allowance.

Mead

There is no indication yet whether Viewdini will have similar restrictions.

While Mead claims the company has several early warning indicators for customers approaching their monthly usage cap, he admits the company hopes to make additional revenue from customers who choose to exceed their allowance and buy additional data.

“We look at it as great flexibility for customers,” Mead called that choice.

While Verizon joins other wireless carriers in calling urgently for additional wireless spectrum, its marketing department does not recognize any wireless data shortage, and continues to introduce new products that encourage their customers to use an increasing amount of data, from which Verizon admits it will earn an increasing percentage of its revenue.